Excess capacity is not found under:
Monopoly
Monopolistic competition
Perfect competition
Oligopoly
Correct Answer :
C. Perfect competition
Excess capacity refers to a situation where a firm is producing at a lower scale of output than it has been designed for. A firm has excess capacity if it produces less than the quantity at which ATC is a minimum. Firms in monopolistic competition operate with excess capacity in long-run equilibrium. The downwardsloping curve for the products in monopolistic competition is the cause of excess capacity. There is no excess capacity in perfect competition in the long-run. So, in monopolistic competition, output is less than the efficient scale of perfect competition. Excess capacity is a characteristic of natural monopoly and monopolistic competition. It may arise b/c as demand increases, firms have to invest and expand capacity in lumpy or indivisible portions. Firms may also choose to maintain excess capacity as a part of deliberate strategy to deter or prevent entry of new firms.}
Related Questions
The slope of indifference curve shows:
Income level
Satisfaction level
Marginal rate of substitution
Demand level
At the point where a straight line demand curve meets the quantity axis (x-axis), elasticity of demand is:
Equal to zero
Equal to one
Equal to infinite
More than one
For the given production function, technical inefficiency is defined as:
Sets of points relating production function that maximizes output given input (labor) i.e. Q = f(L, K)
Sets of points relating production function that produces less output than possible for a given set of input (labor) i.e. Q < f(L, K)
Use of imported technology
None of the above
Other things remaining the same, when a consumers income increases his equilibrium point moves to:
A lower indifference curve
A lower PPC curve
Remains on same indifference curve
A higher indifference curve
A monopolist will fix the equilibrium output of his product where the elasticity of his average revenue curve is:
Less than one
Equal to one
Greater than one
Less than one
Decrease in demand results in:
Upward shift in demand curve
Downward shift in demand curve
Movement on the same demand curve
No movement or shift at all
A budget line shows:
Price of commodity X in terms of Y
Price of commodity Y in term of X
Income of the consumer
All of the above
A mixed economy is characterized by the coexistence of:
Modern and traditional industries
Public and private sectors
Foreign and domestic investments
Commercial and subsistence farming
Economics define technology as:
Societys knowledge of production
Applied science
Knowledge of science and mathematics
None of the above
General equilibrium is concerned with simultaneous equilibrium of:
Few economic agents
All the economic agents
Two economic agents
Many economic agents
Marginal Productivity Theory deals with the theory of:
Distribution
Exchange
Market structure
Consumer behaviour
If the marginal utility is divided by the price of the commodity then it is called:
Real Marginal Utility
Gross Marginal Utility
Weighted Marginal Utility
Money Marginal Utility
To calculate the elasticity of demand, which of the following formula is used?:
Percentage change in demand Original demand
Proportionate change in demand Proportionate change in price
Change in demand Change in price
None of the above
If the commodity is inferior then:
Income effect is positive but substitution effect is negative
Income effect is negative but substitution effect is positive
Both income effect and substitution effect are negative
Both income effect and substitution effect are positive
According to Marginalists, the price of any commodity is determined by:
Marginal usefulness
Marginal cost
Both of them
None of them
In real life firms:
Loss because of past
Learn from past
Destroy because of past
None of the above
In monopoly, new firms:
Can enter and exit
Partially can enter and exit
Cannot enter
None of the above
A firm in a position of equilibrium is supposed to be maximizing:
Output
Sales
Profits
None of the above
In case of monopoly, when total revenue is maximum:
MR is positive
MR falls
MR rises
MR is zero
We can find total utility by:
Multiplying the number of unit by its marginal utility
Adding up the marginal utility of all units
Multiplying price by number of units
None of the above
The supply curve would probably shift to the right if:
Resource( factors of production) used in production became more costly
The technology of production improves
Consumers income increased
Some sellers left the market
Which of the following is an implicit cost of production?
Wages of the labor
Charges of electricity
Interest on owned money capital
Payment for raw materials
If the commodities X and Y are perfect complements then:
None of the above
The relationship between AC and MC curves depend upon the behavior of:
AP curves
MP curves
Both of them
None of them
Indifference curve approach (ordinal approach) is superior to utility approach (cardinal approach) because:
In ordinal approach we can separate the income effect from the substitution effect of a price change
In ordinal approach we can study the consumer behavior more closely
In ordinal approach the consumer is assumed more rational
In ordinal approach the consumer has more income
In first degree price discrimination, monopolist takes away :
All of the consumer surplus
All of the producer surplus
Some part of the consumer surplus
None of them
At a point where a straight line demand curve meets the price axis (Y-axis), the elasticity of demand is:
Equal to one
Less than one
Equal to zero
Equal to infinite
In long run, a firm can change:
Fixed factors
Variable factors
Both of them
None of them
The modern cost curves are based upon the idea of:
Fixed capacity
Specific capacity
Excess capacity
Reserve capacity
Which of the following is not an explicit cost of production?
Wage of self-employed proprietor
Depreciation on machinery
Returns on owned capital
Cost of raw materials